Question

The Federal Reserve uses monetary policy to

print money. create money. increase taxes. increase government spending. force banks to loan money.

Answer 1

As per me the question requires more clarification,still i'm trying to understand your question and answer it in best possible manner so that you can get your confusions clear.

Federal Reserve is the apex bank of the US economy and is also known as the central bank.It has a certain crucial set of functions to perform in the economy which determines the growth and development prospects of an economy.In an economy,there are 2 types of policy commonly known as the monetary and the fiscal policy,both aimed at the growth,development and expansion of the economy.The 'fiscal policies' are concerned with the policies of the government regarding taxation and expenditure in the economy.It tries to explain how revenue can be generated for the government and how it can be spent/utilized in the best possible manner for the betterment of the economy of the government.This policy is controlled and exercised by the government of the nation.The 'monetary policies' are the policies exercised by the central bank to achieve the objectives of price stability,full employment and economic growth.It mainly aims to address issues regarding money supply,availability of credit and cost of credit etc in the economy.These factors too play a very crucial role in the welfare of the economy.

Here in this question,the function of money printing is carried out by the US treasury and does not comes under the monetary policy of federal reserve.Money creation is however done by the federal reserve directly itself(very rare) or indirectly through the commercial banks of the economy.Since'credit' is an important part of money supply,the central bank creates money using its various policy instruments like various rates and ratios.These rates and ratios directly influences or controls the money creation capabilities of commercial banks,thus this way central bank can achieve desired results.As mentioned above,taxation comes under the fiscal policies of the government,the federal bank has no control or influence over increasing or decreasing taxes.The govt. increase taxes mainly to increase its revenue to achieve desired results.Expenditure once again comes under the fiscal policy controlled by the government.The function of forcing banks to lend money loans to different sections of the economy comes under the federal reserve which forces commercial bank to give loans as per the desired quantities.It does that through moral suasion or creating pressures on banks through its powers and actions.